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Please answer each question in the text below; please write the breakdown of the calculation. 1. A company is using the dividend-growth model in paying
Please answer each question in the text below; please write the breakdown of the calculation. 1. A company is using the dividend-growth model in paying their dividends. Today they decided to pay $2.6 dividend. This dividend is growing at a rate of 10%. Meanwhile, the required rate for the stock is 18%. As an investor, compute the value of that stock and explain your answer. (1 mark) 2. Mohammad, as new investor is looking to invest in stocks. He consults a Financial analyst who advised him to buy stock from ABC Corp, which is currently sold in market price $48.98. the respective stock returns $3.2 in dividend. The growth rate of the dividend is 8% per year. If Mohammad wants to have 20% on his invested funds, do you think what the financial analyst is proposing for him is a good deal or not? Explain you answer. (2 marks) 3. Assume we have the below data: (3 marks) Required return 20%; current dividend $2; Growth rate 10% a- Compute the stock's value. - Assume now that the growth rate g=12% but dividend does not change. Compute the stock's value. C Assume that the required return drops to 18% while also the dividend does not change. Compute the stock's value, and explain the difference between your answers in (a), (b) and (c)
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